Boeing to build the 737 MAX in Renton

The Boeing Co. will build the 737 MAX in Renton, pending the approval of an early contract extension by the company's Machinists.

The agreement, reached after several weeks of negotiations between Boeing and the International Association of Machinists & Aerospace Workers (IAM), was announced Wednesday.

Machinists members will vote next week on the four-year contract extension.

The announcement comes just two weeks after Gov. Chris Gregoire laid out a statewide plan in Renton to ensure the 737 MAX is built in Washington; it stresses the need for major investments in education at all levels and in worker training to meet the needs of the aerospace industry.

The 737 production plant employs thousands of workers in Renton and the announcement helps ensure a stable workforce for years, if not decades.

The commitment also ends uncertainty about the future of the aerospace industry in Washington and its 10s of thousands of direct and indirect jobs. About 650 companies in the state supply goods and services to Boeing.

“The City of Renton is thrilled that The Boeing Co. and the Machinists union have reached a landmark agreement to ensure that the 737 MAX is built in Renton," said Renton Mayor Denis Law in a news release Wednesday.

Boeing has built airplanes in Renton for 70 years, including the 737, the most popular jetliner ever. Last year, the city signed a long-term lease agreement with Boeing for its use of Renton Municipal Airport.

"The City of Renton is demonstrating on a daily basis our commitment to meeting Boeing’s needs and stands ready to accommodate any new requirements that today’s decision will bring about," he said. "We continue our efforts to ensure a seamless and speedy permitting process for the capital improvements to the Renton plant to meet the company’s production needs."

Boeing's decision, he said, "will ensure that for years to come thousands of workers will remain on the job here in Renton, the best place in the world to produce commercial airplanes.”

In a statement Wednesday, Gregoire commended "both Boeing management and the Machinists for coming to the table, negotiating in good faith and working together to reach an agreement.

"This tentative deal recognizes the talent of Boeing’s highly trained workforce, while providing the company the confidence it needs to assure its customers that planes will be delivered on schedule. And as this sector becomes increasingly competitive, this initial agreement shows a strong commitment by both sides to secure the future of aerospace in Washington state."

Gregoire reiterated that in an internationally competitive market, "we must not take anything for granted."

She urged the Legislature to pass the $9.8 million in funding to implement her education and training proposal.

"A company’s success – and its ability to grow jobs – is dependent on the talent of its employees. The proposals I laid out will train the workforce needed to ensure this critical industry expands now, and for generations to come," she said in a statement.

In what the company describes as an effort to improve its relationship with the Machinists, Boeing said Wednesday in a news release that for several weeks it has been discussing with the union the possibility of a contract extension. The current contract is set to expire in September 2012. At the same time, Boeing has been reviewing potential sites for 737 MAX production since the company announced in August that it will build a new-engine variant of the 737, according to the company.

Boeing has assessed the business case for locating production of the 737 MAX in Renton in light of the economics of a proposed new labor agreement, and the company is prepared to locate 737 MAX production in Renton provided the economics contained in that proposal are achieved, according to the company's new release.

The company will make the necessary investment to produce Next-Generation 737s and 737 MAXs in its existing Renton facility, if the contract is ratified, according to the news release.

"The 737 MAX builds upon the legacy of the world's best single-aisle airplane and continues to generate overwhelming response from our customers," said Jim Albaugh, president and chief executive officer, Boeing Commercial Airplanes. "If our employees ratify a new agreement, building the 737 MAX in Renton will secure a long and prosperous future there, as well as at other sites in the Puget Sound area and in Portland, Ore., where 737 parts are built."

Boeing has received more than 700 commitments from its customers for the 737 MAX. The first 737 MAX is expected to enter service in 2017.

Leaders of the International Association of Machinists and Aerospace Workers said Wednesday said the tentative agreement with Boeing also would ensure continuation of wide-body aircraft work in Puget Sound, according to a union news release. In addition to the job security language, terms of the four-year proposal include:

• An incentive program intended to pay bonuses between 2 and 4 percent;

• A ratification bonus of $5,000 for each member;

• Increases to the formula for calculating pensions in each year of the pact; and

• Guarantees that new hires would continue to receive traditional pensions.

The proposed extension is unusual, given that the IAM’s current contract with Boeing isn’t set to expire until September 2012, according to the union press release. IAM District Lodge 751 President Tom Wroblewski called it an “extraordinary proposal.”

The proposed contract extension would “secure thousands of jobs while raising Machinists’ pay and pensions,” he said. “Hopefully it also signals the start of a new relationship that can both meet our members’ expectations for good jobs, while giving Boeing the stability and productivity it needs to succeed.” In addition to the prospect of reliable and uninterrupted aircraft production through September 2016, the agreement provides Boeing with savings in health care costs, partly by encouraging union members to enroll in wellness programs and partly by increasing the share they pay toward their health benefits, according to the union. As a further step, the IAM and Boeing agreed to establish standing committees of top-level union representatives and company officials with the ability to quickly address conflicts and opportunities.

“These committees are designed to provide the means and opportunity to resolve issues that have led to work stoppages in the past,” said IAM International Vice President Rich Michalski, who helped guide the talks. “It was open and honest dialog that led to this tentative agreement with Boeing and I believe that approach and these committees can guide the new relationship going forward.”

The agreement still must be ratified by IAM members working for Boeing in Washington state, Oregon and Kansas. The votes are scheduled for Dec. 7.District 751 represents more than 28,000 workers at Boeing’s Puget Sound plants. The union plans to hold voting at union halls in Auburn, Everett, Renton and Seattle, and a location at Fredrickson. If a simple majority agrees, the proposed contract extension would take affect immediately.

If a majority of those voting do not favor the proposal, then Machinists at Boeing would continue working under the current contract, and negotiators from the two sides would meet again next year to work out terms of a new agreement.

Wroblewski said he’s confident that his union’s members will agree to the contract extension.

“This proposed agreement with Boeing is good for our members, good for the company and good for our communities,” he said. “It gives our members more confidence that Boeing’s truly committed to Puget Sound, and it rewards them for the work they’ve done to make Boeing a world-leading manufacturing company by providing them with the highest pay and best benefits in the industry.”

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